What is Stock Volume?
Penny Stocks are high-risk high-reward trading opportunities that can grow 100% or even 400% overnight due to high trading volume. But volume can be a hard concept to grasp for a new trader.
Which is why in this article we’ll teach you a simple way of understanding stock volume & how it can help you make a lot of money.
What is stock volume?
Stock volume commonly referred to simply as “volume” is the number of shares or contracts traded in a security or an entire market during a given period of time. To put it simply it is the exact amount of shares that trades hands from seller to buyer in a single trading day.
Why is volume important?
Volume is important because it lets us know how desired a stock currently is in the market at any given time. A large amount of volume indicates “high liquidity” which means it will be easy for a buyer to sell if she wishes to exit a trade for any given reason.
Inversely it also means that a small amount of volume (low liquidity) indicates that it will be difficult for a buyer to sell if he wishes to exit a trade for any reason as well.
Volume as a trading signal?
Volume is also used as one of the most important trading signals. All equities including penny stocks have what is called an “average daily volume” number. This is the expected number of volume (give or take a few deviations) that traders expect to have within a given trading day.
If the volume greatly exceeds the average daily volume number it is a key sign that something big is happening within the stock. By following a stocks volume it is sometimes possible to “predict” the start of a bullish or bearish trend.
Closing Words
Stock Volume is a very important indicator of a stocks overall health, and is an especially important indicator to watch out for when trading Penny stocks. Always make sure to check out a penny stocks volume before making a trade as part of your due diligence effort.
By learning to trade on volume you can start making serious money in the penny stock market.
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